Darkness before the dawn
Darkness before the dawn
Executives at Sun Microsystems' SunNetwork conference, held recently in Shanghai, admitted the company has gone a tad awry in recent times, but is now firmly focused on turning the corner.
When a company goes through 12 straight quarters of diminishing year-on-year revenue returns, it really ought to be thinking of new ways to breathe life back into its operation and stop the rot. And so Sun's flurry of announcements at its recent SunNetwork conference in Shanghai came to pass.
With former Sun software chief Jonathan Schwartz installed as the company's new president and COO, the vendor appeared keen to give the audience the impression that the new broom was being administered with some vigour, and no wonder, given Sun's well documented struggles since the heady days of the dotcom boom.
The biggest news that Sun was looking to push was he introduction of its new subscription pricing model for storage and services, offering storage for as little as two US cents per megabyte per year, with the proviso that the customer signs a contract for a minimum of three years, with a minimum of 30 terabytes.
While this is not a move Sun may have considered during its period of sustained growth, leaner times call on companies to be more imaginative in order to get the market enthusiastic about what they are offering again.
The subscription based model is likely to appeal to the customer, as it allows the customer to avoid hefty up front costs. From Sun's perspective, it provides them with a steady, predictable revenue stream.
Aside from that though, it also demonstrates that Sun is still willing to try new things.While posting consecutive quarterly losses for a prolonged spell, as Sun has, may inhibit innovation, with companies looking to play things safe for fear of suffering deeper losses, Anil Gadre, Sun's chief marketing officer, insists the picture is quite the opposite at Sun, and that there is a general determination not to get sucked into that way of thinking.
"The last thing you want to do in times like this is have a mentality that is getting more inward. On some level it's actually more liberating because you can experiment a little more and take a few chances.
"We are all very fixated on making this company profitable on a sustained basis and growing again, so we are doing lots of things simultaneously to do that, ranging from new products to new kinds of services that we think will really interest customers. We are also working very hard on reducing costs."
Gadre says the company is also alive to "doing some things that are more vertically oriented by industry, market tipping kinds of things that can cause growth to happen faster. And then there are these new forays with new business models, mostly in areas where we have never been as a company, so yes, there is certainly an interest here in being nimble, figuring things out quickly, gaining traction fast, changing course and operating the business in such a way that we can react to the market."
Paul Giroux, senior director of Sun's Data Management Solution Sales division, agrees that narrow views are not countenanced at Sun, from the top down.
"I think Scott (McNealy-Sun CEO) and the management team have been very good about not doing that, not just putting a bet on a single thing and hoping it's the winner. We are still spending a lot on R&D. Analysts beat us up a bit over that, saying that maybe we spend too much on R&D, but Scott is singularly focused on making sure we have a portfolio of IP that will be broad enough to allow us to make multiple bets in multiple areas.
"The company will turn around. The customers want us to win, as the alternative is one systems vendor left in the marketplace that is creating IP."
Schwartz says his own personal epiphany on the whole subscription model for storage idea came during a visit to a shopping mall, when he chanced upon a fellow trying to buy a new mobile phone, only to be told that he could not buy the handset, but should he sign a contract, the phone would come free.
"That will be the way in which any device which talks to the network will be delivered over time. I thought 'why hasn't that come to the data centre', as you'd think that of all places that touch the network, that would be the starting place for that model of selling a subscription to deliver a service, but it wasn't-it started in handsets and cable set-top boxes."
Schwartz also has a clear view of how he thinks the storage business as a whole will pan out. Faced with a cents-per-megabyte curve that is on course to hit zero cents per megabyte for storage in a few short years from now, Schwartz is convinced the future for storage vendors and users alike will be focused on value-adds.
"Our research shows that customers are willing to pay for various attributes of storage. What I mean by that is access speed, level of security, level of availability and reliability of the storage.
"I think this is unploughed ground in terms of where this is going to go, but if you think of it in the same way as the postal service, where you have a base rate, but also certified mail or registered mail, which you pay a premium for. I think storage is going to head in that direction."
While the subscription model may on the face of it look to be the best option for enterprise customers, with customers locked into a three year contract, it would seem that those who take out a subscription, as opposed to, say, a leasing model, would have a lesser degree of leverage when it comes to getting the latest gear. Not a bit of it, says Gadre.
"There's value in upgrading people to newer technology in terms of more manageability. As we think about remote management, remote health checks, and so on, there is certainly value in having more modern infrastructure out there. Also, when looking at virtualisation, the newer machines are more capable of pooling and sharing, so there is an incentive to have newer equipment out there."
That all sounds great for the customer, but what's in it for Sun? "Our philosophy here is if people are able to realise greater reliability or lower total costs, they are likelier to buy from us than some other guys. It's really that straightforward. That's why we are trying to experiment with some of these new (delivery) models, some of which will work well and some of us will teach us what doesn't actually work.
"I think this is a very competitive business to the extent that people rely on you for innovation, and if you aren't the one bringing out the replacement for your own gear, you expose yourself to some other guy."
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